Tuesday, December 9, 2014

Is Timeshare Rescission Fair to Purchasers?

A long time reader of this blog e-mailed me a question last week that bears discussing:

"I'm curious to what your thoughts are on the very short period of time that a consumer has to decide to buy the timeshare or not---generally within the confines of a 3 hour high-pressure sales pitch and the relatively short time frame---generally a week or so that they have to decide to cancel or not vs. the length of time the resort has to allow you to use the product---generally several months at best.  Why the inequality?"


I hadn't really given it much thought before, but this reader raises a very interesting point.  Why the inequality here?

Let's look at other purchases and other "rescission periods" and the reasons one may rescind such purchases.

If I purchase an article of clothing, I not only get to try it on at the store, but I get to try it on in the comfort of my own home.  If I bought a pair of shoes, they may fit, but they may not match the dress.  So I can return them for a full refund.  And while I don't need to provide a reason within the mandated 15 or 30 day refund period, the point is I've had a chance to use the shoes and make an informed purchasing decision.

Other, larger ticket purchases also allow the purchaser to use the product.  You don't buy a $35,000 automobile under the terms "we'll mail you the steering wheel within 3 months, but you only have 3 days to cancel your purchase."  You need the steering wheel to use your purchase.

There's airline tickets and hotel reservations that you pay for now with "delayed usage" of course.  But, if the airplane doesn't take off or the hotel is not what was advertised, you have rescission recourse.

With timeshare, an average purchaser puts down $2,000 (an increasing number pay cash in full, according to a recent ARDA survey) and has an average of 7 days to cancel and receive a full refund.

However, their usage can be months, or up to a year away.  Think about it...the resort has to send the exchange company paperwork to the exchange company and the exchange company has to process the paperwork.  The best case scenario for this is a month...certainly longer than the average rescission period.

Then there's the matter of when the purchaser actually receives the week or points into their account and when the all-important "usage-year" begins.  My conservative best guess on this is 90-120 days.

Am I and my reader missing something here?


  1. Those are recission rights for a consumer contract. Note there are no such rights on a retail purchase, so your example of buying a pair of shoes and being able to return them is a function of the retailer's policy.

    Many retailers have quite liberal policies to encourage more sales.

    Timeshares are sold under a consumer contract, and those contracts have a state mandated cooling off period, it's got nothing to do with exchange companies, resorts, timeshares, or otherwise. It's for consumer contracts for whatever purpose. There may be something similar when you buy and finance a car, at least in some states.

    1. You are correct. I only use the word rescission to draw an analogy.

      I understand that it is a consumer contract, but it is "fair" to pay for the product but not be able to use it for several months, by which time, your ability to cancel and get your money back has expired?

    2. Lisa, as we have discussed, *nothing* about timeshare sales or usage is fair.

      The companies who dominate that industry get up early in the morning and start working on new ways to essentially ripoff their customers, by selling them a timeshare *ownership* that they can't use and ultimately don't really own.

      By preventing you from using what you bought, mostly by renting the heck out of it so you have to plan ahead a year.

      Whereas if you called at the last minute having bought *nothing* they would likely rent you the same unit for less than the annual maintenance.

      It's a pretty serious problem and it's getting worse. Rescission is not the issue, what we need is ownership rights.

      If they could not rent out your property they would instead be eager for you to use it so they could sell you other things. If they had to leave it sitting empty, or if only *you* could rent out your unit.

      As it is, it's much more profitable to rent out your property to someone else keeping the money themselves, and sell them things, and collect your maintenance from you giving you *nothing*.

      It's a very bad problem, and it will have to be fixed by the government. After that timeshare companies will be much less profitable. But it will all be much more fair to buyers.

    3. You bring up some great points. How would you suggest the industry be "fixed"?

  2. Make your timeshare absolutely yours. You would receive any rent. If you decide not to rent your week it could just sit there empty. They cannot rent it and keep the money, like they do now.

    Make the timeshare interest only secured by itself, it's value (like other kinds of real estate), which means you could just stop paying and they couldn't credit bureau you, or turn you over to collections.

    So in order to keep you paying your maintenance you would then become a valuable customer to them, one they had to keep happy. They could not abuse you, and if they raised the maintenance to an amount you were not willing to pay they would lose you as a customer.

    As it is now they can raise the maintenance to $900 a week, and rent the same week on their own website for $450. That would make you wish you had not bought anything from them at all, you could just rent. The unit and the place is the same, remember. But you didn't have to buy it!

    That would be a good start. Customers would be valuable again.

    1. Interesting comments, although I'm not at all comfortable encouraging people to walk away from their financial commitments. There ARE repercussions and they aren't good ones.

  3. Financial commitments? This is supposed to be real estate. But with timeshare, even after you pay for it completely they can essentially steal it from you.

    Why in the world does that make sense?

    If you buy a timeshare and the maintenance is $450 a year, and years later the maintenance is now $900 a year and they want a $5,0000 special assessment, like at Diamond Poipu, well, I don't call that a legitimate financial commitment.

    Especially when Diamont Poipu weeks are available for $900 right now. Nothing to buy.

    Nope, timeshares are just too arbitrary. The developer always owns most of the weeks, and dominates the entire project. Now I once rented at an owner managed timeshare, and that was quite different from a developer managed resort.

  4. As a small project timeshare manager, I would like to point out that there are a lot of differences from resorts. For one there should be a board of the owners that makes the decisions, whether to increase maintenance fees and so on, this board is advised by the management on why they feel these items are appropriate. Also you have to understand that the cost of everything is going up every year, and that all the guests/owners traveling want more and more updated "modern" touches such as tvs that sync with phones and tablets.... Not all resorts RENT out the units, especially small resorts that have to dedicate most of the usage of the units into a trading company at the owners request. As management i feel strongly that we have every right to report or even foreclose on those who do not pay the maintenance fees for more than two years, when you have 800 owners if 100 of them stop paying because of one thing or another that affects what the resort will be able to afford that can require the resort to have to cut back in amenities, labor and a lot of other area that then make the guests feel like the place is not being maintained if the resort is not able to get new owners for some of them then the place will either be forced to skyrocket maintenance fees or close down.

    1. First of all, thank you for reading this blog! Second of all, thank you again for taking the time to respond to this post as someone in the industry.

      You bring up some good points and I am in no way saying that owners who don't hold up their end of the deal are to be "excused."

      However, that wasn't the point of the original question. A consumer has, on average, 10 days to cancel their purchase when it will be, on average, 9 months before they have the chance to use the product.


    2. The Consumer should have an idea if they are wanting to invest into this already before going into a high pressure buying atmosphere. This is not for everyone. if you do not travel a lot its not a good idea... However my thoughts on the 10 days is simple, this is a deeded property, if you change your mind after that 10 days your resort may be willing to take it back, if not you can sell it. You are not stuck here. As for my project we offer owners the ability to come to their home resort as long as they request, if they are still wanting to trade they can rent the unit per night based on a Percentage of their maintenance fee.
      Resort manager